ABSTRACT: Carbon leakages can wipe away mitigation benefits under REDD achieved in a country. So
far no REDD mechanism has been proposed that can separate good credits of true mitigation value
from those that could possibly be stained by leakages. The greatest concern of investors in such a
market would be the fear of buying goods whose real worth is far less than that paid for, much like
the subprime housing crisis of 2008 when good financial products of low risks were bundled with
those with high risks and sold as composite products for leveraging, a financial innovation that
brought doom to the participating banks. This paper proposes a new REDD Plus architecture that
would ensure that instead of every REDD credit becoming suspect the market would discount only
those credits that have a higher probability of leakages unless the monitoring system is considered
robust enough to allay the fears and would thus be able to ensure environmental integrity by
punishing lapses in specific cases. This will also permit simultaneous operation of Fund based
mechanism within same national boundaries in distinct geographical areas and enable incorporation
of forestry projects under the CDM within the REDD framework.